CRMT
Americas Carmart INC
NASDAQ
10-Q: Americas Car-Mart Reports Q3 2024 Results: Revenue Declines Amidst Increased Credit Loss Provisions
Sentiment:
Quarterly Report
11 March 2024 9:00 AM
Americas Car-Mart experienced a decrease in revenue and a net loss for the third quarter of fiscal year 2024, primarily due to a decline in retail unit sales and increased provisions for credit losses.
Worse than expected
The company reported a net loss of $8.5 million for the quarter, compared to a net income of $1.5 million in the same period last year.
Total revenue decreased by 7.9% year-over-year, driven by a decline in retail unit sales.
The provision for credit losses increased to 37.3% of sales, up from 31.2% in the prior year's quarter.
Summary
- Americas Car-Mart reported a net loss of $8.5 million for the third quarter of fiscal year 2024, compared to a net income of $1.5 million in the same period last year.
- Total revenue decreased by 7.9% to $299.6 million, driven by a 12.4% decline in sales revenue, partially offset by a 16% increase in interest income.
- The company sold 11,664 retail units, a decrease of 19.6% compared to the same quarter last year, while the average retail sales price increased by 7.5% to $19,455.
- The provision for credit losses increased by 4.6% to $89.6 million, reflecting a higher percentage of sales at 37.3% compared to 31.2% in the prior year.
- Interest expense increased significantly by 71.3% to $16.7 million due to rising interest rates and increased average borrowings.
- For the nine months ended January 31, 2024, the company reported a net loss of $31.8 million, compared to a net income of $18.3 million in the same period last year.
- Total revenue for the nine-month period increased by 1.6% to $1.03 billion, with a 21.8% increase in interest income offsetting a 1.8% decrease in sales revenue.
- The provision for credit losses for the nine-month period increased by 28.2% to $321.3 million, representing 37.6% of sales.
- The company's finance receivables, net, stood at $1.086 billion as of January 31, 2024, compared to $1.063 billion as of April 30, 2023.
- The allowance for credit losses was $335.1 million, or 25.74% of the principal balance in finance receivables, net of deferred revenue and pending APP claims.
Sentiment
Score: 3
Explanation: The document presents a negative outlook due to decreased revenue, a net loss, and increased credit loss provisions. While there are some positive initiatives, the overall financial performance is concerning.
Positives
- Gross profit per retail unit sold increased by 8.3% for the nine months ended January 31, 2024.
- The company is implementing a new loan origination system to improve customer experience and reduce credit losses.
- The company has entered into a strategic partnership to improve its inventory supply chain process.
- The company has completed two asset-backed securitization offerings of non-recourse notes during fiscal 2024.
Negatives
- The company reported a net loss of $8.5 million for the third quarter of fiscal year 2024.
- Total revenue decreased by 7.9% year-over-year.
- Retail unit sales decreased by 19.6% compared to the same quarter last year.
- The provision for credit losses increased to 37.3% of sales.
- Interest expense increased significantly by 71.3% due to rising interest rates and increased average borrowings.
- Net charge-offs as a percentage of average finance receivables increased to 6.8% for the three months ended January 31, 2024 compared to the prior year period of 5.9%.
Risks
- The company faces risks related to general economic conditions, including fluctuations in gas prices, grocery prices, and employment levels.
- The availability of quality used vehicles at affordable prices is a risk, influenced by new vehicle production and sales.
- The company's ability to underwrite and collect contracts effectively is crucial, and any failure could lead to increased credit losses.
- Changes in consumer finance laws or regulations could impact the company's operations.
- The company is exposed to security breaches, cyber-attacks, or fraudulent activity.
- The company's credit losses are impacted by market and economic factors, including macro-economic conditions such as inflation.
- The company's ability to hire, train, and retain qualified associates is critical to its success.
Future Outlook
The company expects to continue to focus on managing gross margin dollars, improving wholesale results, controlling costs, and making operational improvements around the acquisition and disposal of vehicles. The company also expects the full implementation of its new loan origination system to improve the customer experience, provide enhanced data and visibility into credit decisions, and help reduce credit losses and repossessions. The company anticipates that continuing strong wage increases for its customers will cause affordability to improve gradually over the next couple of years.
Management Comments
- The company has been focused on improving vehicle quality by bringing lower mileage and on average newer model-year vehicles to our consumers, while balancing this with affordability.
- The company believes this will aid in driving down our customers vehicle repair costs, reduce our service contract repair expenses, and lead to better recovery values in the event of repossession.
- The company has implemented initiatives around vehicle reconditioning efforts and scaling that are expected to provide a better volume of affordable units.
- Management continues to focus on improved execution at the dealership level, specifically as related to working individually with customers concerning collection issues.
Industry Context
The company operates in the Integrated Auto Sales and Finance segment of the used car market, which is sensitive to economic conditions, interest rates, and consumer credit availability. The company's results reflect the challenges of the current macroeconomic environment, including inflationary pressures and rising interest rates, which are impacting both the company's costs and its customers' ability to make payments. The company's strategic partnership with a leading automotive services and technology provider is an attempt to improve efficiencies within the inventory supply chain process, which is a common challenge in the industry.
Comparison to Industry Standards
- The company's provision for credit losses as a percentage of sales at 37.3% for the quarter and 37.6% for the nine months is significantly higher than the pre-pandemic average of 23.71% in fiscal 2019, indicating a higher risk profile compared to historical performance and potentially compared to industry averages.
- The company's average retail sales price of $19,455 in Q3 2024 is higher than the prior year, reflecting the trend of increased used car prices, which is a common theme across the industry.
- The company's focus on improving vehicle quality and reconditioning efforts aligns with industry trends aimed at enhancing customer experience and reducing costs.
- The company's implementation of a new loan origination system is a move towards technological advancements, which is a common trend in the industry to improve efficiency and reduce risk.
- The company's reliance on securitization for funding is a common practice in the auto finance industry, but the company's specific terms and rates should be compared to industry benchmarks to assess its competitiveness.
Stakeholder Impact
- Shareholders are impacted by the net loss and decreased revenue.
- Customers may experience changes in credit approval standards and loan terms.
- Employees may be affected by cost-cutting measures and changes in operational practices.
- Lenders are impacted by the changes in the revolving credit facilities and financial covenants.
Next Steps
- The company plans to continue to focus on managing gross margin dollars.
- The company will continue to focus on improving wholesale results.
- The company will continue to focus on cost controls.
- The company will continue to focus on operational improvement around the acquisition and disposal of vehicles.
- The company expects the full implementation of its new loan origination system to improve the customer experience and reduce credit losses.
- The company expects to continue to invest in the development of its workforce.
Legal Proceedings
- The company is involved in various legal proceedings in the ordinary course of business, but does not expect any of them to have a material adverse effect on its financial position, results of operations, or cash flows.
Related Party Transactions
- Car-Mart of Arkansas routinely sells its finance receivables to Colonial at what the Company believes to be fair market value.
Key Dates
- 2015-08-05: Shareholders approved the Amended and Restated Stock Option Plan.
- 2018-08-29: Shareholders approved an amendment to the Restated Stock Incentive Plan.
- 2020-08-26: Shareholders approved an amendment to the Restated Option Plan.
- 2022-08-30: Shareholders approved an amendment to the Restated Option Plan.
- 2023-01-31: End of the third quarter of fiscal year 2023.
- 2023-04-30: End of fiscal year 2023.
- 2023-09-28: Shareholders approved an amendment to the Restated Option Plan.
- 2024-01-31: End of the third quarter of fiscal year 2024.
- 2024-02-28: Amendment No. 6 to the Third Amended and Restated Loan and Security Agreement was entered into.
- 2024-03-08: Date of share count for the report.
- 2024-03-11: Date of report filing.
Keywords
used car sales, auto finance, credit losses, finance receivables, interest income, revolving credit, securitization, loan origination, retail sales, inventory management
CRMT
Americas Carmart INC
NASDAQ
Sector: TBD
Filings with Classifications
Better than expected
18 June 2025 6:34 PM
Beneficial Ownership Statement
- The purchase of company stock by a Chief Financial Officer is generally viewed as a positive signal, indicating management's belief that the stock is undervalued or that the company's future performance will be strong.
Capital raise
12 June 2025 7:30 AM
Quarterly and Annual Results
- On May 29, 2025, Car-Mart completed a term securitization transaction involving the issuance of $216 million of asset-backed notes.
- The securitization achieved an overall weighted average life adjusted coupon of 6.27%, which improved by 22 basis points compared to the Company's January 2025 issuance and by 117 basis points from the October 2024 securitization transaction.
- Net proceeds from the securitization were used to pay down the outstanding balance on the Company's revolving line of credit.
- The Company continues to explore options to diversify and expand its financing sources, such as potential warehouse lines of credit and the issuance of longer-term debt securities.
Better than expected
12 June 2025 7:30 AM
Quarterly and Annual Results
- Diluted EPS for FY25 turned profitable at $2.33, compared to a significant loss of $4.92 in FY24, indicating a strong financial recovery.
- Q4 FY25 diluted EPS significantly increased to $1.26 from $0.06 in Q4 FY24, demonstrating strong quarterly performance.
- Gross margin percentage improved by 200 basis points for the full year and 90 basis points for Q4, reflecting effective cost and pricing strategies.
- Net charge-offs as a percentage of average finance receivables improved for both Q4 and the full year, signaling better credit quality and risk management.
- The allowance for credit losses improved to 23.25% at April 30, 2025, from 25.32% a year prior, indicating a healthier loan portfolio.
Worse than expected
11 June 2025 7:14 PM
Insider Transaction Report
- The document details planned significant sales of common stock by a Director and 10% owner, Adam K. Peterson, and his affiliated entities.
- A total of 154,269 shares are planned to be sold, representing approximately 9.75% of their prior beneficial ownership.
- Such a substantial planned reduction in holdings by a key insider is generally perceived as a negative signal by the market.
Better than expected
4 June 2025 11:21 AM
Securitization Announcement
- The weighted average coupon of 6.27% is lower than previous issuances (22 basis points better than January 2025 and 107 basis points better than October 2024), indicating more favorable financing terms for the Company.
Capital raise
4 June 2025 11:21 AM
Securitization Announcement
- The Company completed a term securitization transaction, issuing $216 million in principal amount of asset-backed notes.
- Net proceeds of approximately $214.5 million were generated from the offering.
- The proceeds are being used to pay outstanding debt and make initial deposits into collection and reserve accounts.
Better than expected
13 March 2025 10:22 AM
Quarterly Report
- The company reported diluted earnings per share of $0.37 compared to a loss per share of $1.34 in the same quarter last year.
- Gross margin percentage improved by 150 basis points to 35.7%.
- Net charge-offs as a percentage of average finance receivables improved to 6.1% compared to 6.8%.
Capital raise
10 March 2025 4:08 PM
Quarterly Report
- On September 20, 2024, the Company completed an underwritten public offering of 1,700,000 shares of its common stock at a price per share of $43.00.
- The net proceeds of the public offering were approximately $68.2 million after deducting the underwriting discount and offering costs of approximately $4.9 million.
- On October 22, 2024, the Company completed the sale of an additional 138,272 shares of common stock at a price of $43.00 per share, in connection with a partial exercise by the underwriter of an option.
- The net proceeds to the Company of the underwriters partial exercise of the Over-Allotment Option were approximately $5.6 million after deducting the underwriting discount and offering costs of approximately $346,000.
- The Company used the net proceeds from this offering to pay down a portion of the Companys revolving line of credit.
Better than expected
10 March 2025 9:00 AM
Quarterly Report
- The company reported an 8.7% increase in total revenue, reaching $325.7 million for the third quarter of fiscal year 2025.
- Sales volumes rose by 13.2% to 13,198 units, indicating strong sales performance.
- The company's gross margin percentage improved by 150 basis points to 35.7%, driven by better vehicle procurement and disposal strategies.
- Diluted earnings per share were $0.37, a significant improvement compared to a loss of $1.34 per share in the same quarter of the previous year.
Better than expected
5 February 2025 1:46 PM
Securitization Announcement
- The weighted average coupon improved by 95 basis points compared to the October 2024 securitization.
Capital raise
9 December 2024 4:40 PM
Quarterly Report
- The company completed a public offering of 1,700,000 shares of its common stock at a price of $43.00 per share, raising net proceeds of $68.2 million.
- The company also sold an additional 138,272 shares through the partial exercise of an over-allotment option, raising an additional $5.6 million.
- The net proceeds from the offering were used to pay down a portion of the company's revolving line of credit.
Better than expected
9 December 2024 4:40 PM
Quarterly Report
- The company's net income of $5.1 million is a significant improvement compared to a net loss of $27.5 million in the same quarter of the previous year.
- The company's gross margin improved to 39.4% of sales, including a 2.9% benefit from a change in service contract revenue recognition.
- The provision for credit losses decreased by 26.5% to $99.5 million.
Capital raise
5 December 2024 7:30 AM
Quarterly Report
- The company completed an underwritten public equity offering, resulting in net proceeds of $73.8 million.
- The company also completed a private asset-backed securitization offering, resulting in net proceeds of $297.9 million.
- The proceeds from these offerings were primarily used to pay down existing debt.
Better than expected
5 December 2024 7:30 AM
Quarterly Report
- The company reported a significant improvement in diluted earnings per share, moving from a loss to a profit.
- Gross margin improved, both including and excluding the impact of the service contract accounting change.
- Net charge-offs as a percentage of average finance receivables decreased, indicating better loan performance.
Capital raise
22 October 2024 4:06 PM
Capital Raise Update
- The company initially sold 1,700,000 shares at $43.00 per share, generating $67.8 million in net proceeds.
- The underwriters partially exercised their over-allotment option, purchasing 138,272 additional shares at $43.00 per share, resulting in an additional $5.6 million in net proceeds.
Better than expected
11 October 2024 8:30 AM
Securitization Announcement
- The weighted average coupon rate of 7.44% is a 198 basis point improvement compared to the January 2024 transaction, indicating better terms for the company.
Capital raise
20 September 2024 4:05 PM
Public Offering Announcement
- The company is raising capital through a public offering of 1,700,000 shares of common stock.
- The underwriters have an option to purchase an additional 255,000 shares.
- The company expects to receive approximately $67.8 million in net proceeds from the offering.
Capital raise
18 September 2024 2:22 PM
Loan Agreement Amendment
- The company is required to complete a junior capital raise of $50 million or more.
- The net proceeds of the capital raise must be used to pay down the outstanding principal balance of the line of credit.
- A fee of 0.10% of the total permitted borrowings will be charged if the capital raise is not completed by October 31, 2024.
Worse than expected
18 September 2024 2:22 PM
Loan Agreement Amendment
- The reduction in the credit line and the imposition of minimum availability requirements suggest a tightening of financial conditions for the company.
- The requirement to complete a capital raise by a specific date to avoid a fee indicates potential financial pressure.
Worse than expected
16 September 2024 12:11 PM
Quarterly Report
- The company's net loss of $964,000 is worse than the net income of $4.2 million in the same period last year.
- The decrease in revenue by 5.2% is worse than the prior year period.
- The increase in the provision for credit losses as a percentage of sales to 33.2% is worse than the 31.0% in the prior year period.
Capital raise
16 September 2024 12:11 PM
Quarterly Report
- The amendment to the revolving credit agreement requires the company to use the net proceeds of any junior capital raise of $50 million or more to pay down the outstanding principal balance of the line of credit.
- The company will pay a fee to the lenders of 0.10% of the total permitted borrowings under the line of credit if the company has not completed such a capital raise by October 31, 2024.
Worse than expected
4 September 2024 7:30 AM
Quarterly Report
- The company reported a net loss per share of $0.15 compared to a diluted earnings per share of $0.63 in the same quarter last year.
- Revenue decreased by 5.2% year-over-year.
- Net charge-offs as a percentage of average finance receivables increased to 6.4% from 5.8%.
Worse than expected
16 July 2024 4:29 PM
Proxy Statement
- The company reported a net loss of $31.4 million compared to the prior year's net income.
- Revenues decreased 0.5% over fiscal 2023, driven by a 8.8% retail unit volume decrease and a 0.1% decrease in customer count.
Worse than expected
15 July 2024 4:01 PM
Annual Results
- The company's net income decreased from a profit of $20.4 million to a loss of $31.4 million.
- The provision for credit losses increased significantly to 36.5% of sales.
- Retail unit sales decreased by 8.8%.
Worse than expected
18 June 2024 7:30 AM
Quarterly Report
- The company reported a loss per share for the full year, compared to a profit in the previous year.
- Revenue decreased both for the quarter and the full year.
- Net charge-offs as a percentage of average finance receivables increased.
- Interest expense increased significantly.
Worse than expected
11 March 2024 9:00 AM
Quarterly Report
- The company reported a net loss of $8.5 million for the quarter, compared to a net income of $1.5 million in the same period last year.
- Total revenue decreased by 7.9% year-over-year, driven by a decline in retail unit sales.
- The provision for credit losses increased to 37.3% of sales, up from 31.2% in the prior year's quarter.
Worse than expected
8 March 2024 8:00 AM
Quarterly Report
- The company reported a loss per share of $1.34 compared to earnings per share of $0.23 in the same quarter last year.
- Total revenue decreased by 7.9% year-over-year.
- Retail units sold decreased by 19.6% compared to the prior year quarter.
Worse than expected
5 March 2024 4:04 PM
Loan Agreement Amendment
- The reduction in the total borrowing capacity from $600 million to $340 million is a negative development.
- The increase in the unused line fee rate to 0.50% for low utilization is a negative development.
- The removal of pricing tiers for interest rates may result in higher borrowing costs.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.